News / Economy

Egypt to Pay $1.5B in Arrears to Foreign Oil Firms

People shop at Al-Ataba, a popular market in downtown Cairo, Nov. 11, 2013.
People shop at Al-Ataba, a popular market in downtown Cairo, Nov. 11, 2013.
Reuters
Egypt promised on Wednesday to pay $1.5 billion of the $6 billion it says it owes oil firms, hoping the announcement will revive confidence in an economy battered by nearly three years of political upheaval.
 
Egyptian officials speaking at an investment conference also sought to ease mounting concerns over everything from legal uncertainty to the black market for foreign currency.
 
“There is approval to pay $1.5 billion,” Prime Minister Hazem el-Beblawi told the gathering, designed to lure investment from Gulf Arab states and businessmen. He said the arrears had discouraged investment in the critical energy sector.
 
The oil-producing countries rallied behind Egypt after the army ousted President Mohamed Morsi of the Muslim Brotherhood in July, pledging billions of dollar in financial support.
 
Political uncertainty since a popular uprising ousted autocrat Hosni Mubarak in 2011 has frightened away tourists and investors, cutting tax revenues and foreign currency inflows.
 
That has increased pressure on the government to get oil firms investing again in extraction and exploration and attract both Arab and Western investors.
 
Egypt has repeatedly promised to repay arrears to the oil companies following Morsi's removal, which was welcomed by Gulf states fiercely opposed to the Muslim Brotherhood.
 
Finance Minister Ahmed Galal, addressing the same conference, said the central bank would supply the dollars needed to pay the firms.
 
Financial disclosures by firms including BP, BG Group, Edison SpA and TransGlobe Energy show Egypt owed them more than $5.2 billion at the end of 2012.
 
In the week after the army takeover, Saudi Arabia, Kuwait, and the United Arab Emirates pledged a combined $12 billion in grants, interest-free loans and oil products.
 
Now Egypt is hoping Gulf businessmen at the Cairo conference will also pump cash into the country, a U.S. ally which has a peace treaty with Israel and controls the Suez Canal.
 
Investment Minister Osama Saleh told Reuters Egypt hoped to attract $4 billion-$5 billion in direct foreign investment in the year to the end of June 2014.
 
Egyptian government officials speaking at the conference said the country was on track to implementing a political roadmap that will lead to free elections and bring stability.
 
But authorities have not managed to bring calm to the streets, where Morsi supporters stage regular protests against what they call a military coup that has brought widespread human rights abuses.
 
The government says the Brotherhood is a terrorist group and a threat to national security.
 
Political support from Gulf states has helped Egypt withstand criticism from Western allies who have questioned the country's democratic credentials since the army takeover.
 
“How many fish?”
 
Central Bank Governor Hisham Ramez said he expected more Gulf aid, but had no figure in mind. “Actually, we're not only counting on aid. We're counting on investments to come in.”
 
Asked if he anticipated more aid from Saudi Arabia, the biggest Gulf economy, finance minister Galal told Reuters: “I cannot tell beforehand. You go fishing, how many fish are you going to catch?”
 
Egypt badly needs private capital. Foreign direct investment fell to $3 billion in the 2012/13 financial year, which ended in June, compared with more than $10 billion a few years ago.
 
The United Arab Emirates appears especially enthusiastic for its companies to launch or resume projects in Egypt.
 
An informed source close to major Abu Dhabi investment companies told Reuters nearly $5 billion had been committed in loans and investments over the last four months and there was still scope for further investment in Egypt.
 
Kirill Dmitriev, CEO of the Russian Direct Investment Fund, a $10 billion Kremlin initiative, said he was encouraged by the UAE's presence at the conference.
 
“We believe Egypt is becoming an attractive investment destination,” he told Reuters.
 
UAE Minister of State Sultan Al Jaber said sectors under discussion include agriculture, oil, gas and renewable energy.
 
“We can't today define the size of investments. This we consider the beginning of a new page,” he said.
 
“The most important thing we'd like to see happen is the topic of the laws needed to assure investors and protect their capital ...”
 
The government is preparing a law to reinforce the legal standing of past contracts with the state, Mohamed Abazeid, an adviser to Egypt's investment minister, told the conference.
 
The business environment in Egypt has been clouded by court cases that have challenged past contracts concluded by the state. These have included rulings ordering the renationalising of public sector businesses sold off in the Mubarak era.
 
Qatar, which supported the Muslim Brotherhood, has been reluctant to invest in Egypt since Morsi's overthrow.
 
Although Gulf Arab support is vital, Egypt is under pressure to come up with a long-term plan to revive the economy.
 
The army-installed government launched a 29.6 billion Egyptian pound ($4.3 billion) stimulus package this year after Gulf countries pledged aid.
 
The economy grew a meager 2.2 percent in the year to June 30, far too slow to make an impact on youth unemployment estimated at over 20 percent. Beblawi said the government aimed for economic growth of 3.5 percent in the current fiscal year.
 
In a boost to the government officials trying to sell Egypt to Gulf Arab investors, Egyptian tycoon Naguib Sawiris, whose family controls the Orascom corporate empire, said he would invest $1 billion in the country in the first quarter of 2014.
 
He told Reuters the investment would focus on construction, real estate, agriculture and microfinance.
 
But it will take more than one heavy hitter to fix Egypt's finances.
 
The Egyptian pound is being propped up by central bank dollar sales, introduced a year ago to help counter a run on the currency as the plunge in foreign investment and tourism caused a sharp fall in foreign reserves.
 
Reserves, which stood at $36 billion before Mubarak fell, have been under pressure ever since. They totalled $18.59 billion at the end of October and Ramez told the conference they had dipped slightly last month. The November figure is due soon.
 
Ramez said the black market for the Egyptian pound  would “not last long”, as two market sources said the currency had weakened against the dollar because of importer demand.

You May Like

Lesotho Faces New Round of Violence, Political Crisis

Brutal killing of military officer has sent former leaders back into S. Africa where they're watching anxiously as regional officials head in to try to restore peace More

Video US Diplomat Expects Adoption of Bosnian Massacre Anniversary Resolution

Samantha Power says there's broad consensus about killings in Bosnia's war, but Russia calls resolution 'divisive,' backs UN countermeasure More

America's Most Exotic Presidential Pets

From alligators to bears, the White House has been home to some unusual presidential pets over the years More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Making Music, Fleeing Bombs: New Film on Sudan’s Internal Refugeesi
X
Carolyn Weaver
July 06, 2015 6:47 PM
In 2012, Sudanese filmmaker Hajooj Kuka went to make a documentary among civil war refugees in Sudan’s Blue Nile and Nuba Mountains region. What he found surprised him: music was helping to save people from bombing raids by their own government. VOA’s Carolyn Weaver has more.
Video

Video Making Music, Fleeing Bombs: New Film on Sudan’s Internal Refugees

In 2012, Sudanese filmmaker Hajooj Kuka went to make a documentary among civil war refugees in Sudan’s Blue Nile and Nuba Mountains region. What he found surprised him: music was helping to save people from bombing raids by their own government. VOA’s Carolyn Weaver has more.
Video

Video Rice Farmers Frustrated As Drought Grips Thailand

A severe drought in Thailand is limiting the growing season of the country’s important rice crop. Farmers are blaming the government for not doing more to protect a key export. Steve Sandford reports from Chiang Mai, Thailand.
Video

Video 'From This Day Forward' Reveals Difficult Journey of Transgender Parent

In her documentary, "From This Day Forward", filmmaker Sharon Shattuck reveals the personal journey of her transgender father, as he told his family that he always felt he was a woman inside and decided to live as one. VOA’s Penelope Poulou has more.
Video

Video Floodwaters Threaten Iconic American Home

The Farnsworth House in the Midwest State of Illinois is one of the most iconic homes in America. Thousands of tourists visit the site every year. Its location near a river inspired the design of the house, but, as VOA’s Kane Farabaugh reports, that very location is now threatening the existence of this National Historic Landmark.
Video

Video Olympics Construction Scars Sacred Korean Mountain

Environmentalists in South Korea are protesting a Winter Olympics construction project to build a ski slope through a 500-year-old protected forest. Brian Padden reports that although there is strong national support for hosting the 2018 Pyeongchang Winter Olympics, there are growing public concerns over the costs and possible ecological damage at the revered mountain.
Video

Video Xenophobia Victims in South Africa Flee Violence, Then Return

Many Malawians fled South Africa early this year after xenophobic attacks on African immigrants. But many quickly found life was no better at home and have returned to South Africa – often illegally and without jobs, and facing the tough task of having to start over. Lameck Masina and Anita Powell file from Johannesburg.
Video

Video Family of American Marine Calls for Release From Iranian Prison

As the crowd of journalists covering the Iran talks swells, so too do the opportunities for media coverage.  Hoping to catch the attention of high-level diplomats, the family of American-Iranian marine Amir Hekmati is in Vienna, pleading for his release from an Iranian prison after nearly 4 years.  VOA’s Heather Murdock reports from Vienna.
Video

Video UK Holds Terror Drill as MPs Mull Tunisia Response

After pledging a tough response to last Friday’s terror attack in Tunisia, which came just days before the 10th anniversary of the bomb attacks on London’s transport network, British security services are shifting their focus to overseas counter-terror operations. VOA's Henry Ridgwell has more.
Video

Video Obama on Cuba: This is What Change Looks Like

President Barack Obama says the United States will soon reopen its embassy in Cuba for the first time since 1961, ending a half-century of isolation. VOA White House correspondent Luis Ramirez reports.
Video

Video Hate Groups Spread Influence Via Internet

Hate groups of various kinds are using the Internet for propaganda and recruitment, and a Jewish human rights organization that monitors these groups, the Simon Wiesenthal Center, says their influence is growing. The messages are different, but the calls to hatred or violence are similar. VOA's Mike O’Sullivan reports.
Video

Video Blind Somali Journalist Defies Odds in Mogadishu

Despite improving security in the last few years, Somalia remains one of the most dangerous countries to be a journalist – even more so for someone who cannot see. Abdulaziz Billow has the story of journalist Abdifatah Hassan Kalgacal, who has been reporting from the Somali capital for the last decade despite being blind.
Video

Video Rabbi Hits Road to Heal Jewish-Muslim Relations in France

France is on high alert after last week's terrorist attack near the city Lyon, just six months after deadly Paris shootings. The attack have added new tensions to relations between French Jews and Muslims. France’s Jewish and Muslim communities also share a common heritage, though, and as far as one French rabbi is concerned, they are destined to be friends. From the Paris suburb of La Courneuve, Lisa Bryant reports about Rabbi Michel Serfaty and his friendship bus.

VOA Blogs

World Currencies

EUR
USD
0.9012
JPY
USD
122.90
GBP
USD
0.6400
CAD
USD
1.2582
INR
USD
63.438

Rates may not be current.